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Tuesday December 18, 2018

Finances

Facebook Beats Earnings Estimates

Facebook, Inc. (FB) announced quarterly earnings on Wednesday, April 25. The social media giant's surge in revenue and profit surpassed Wall Street's expectations, causing shares to rise 6% after the results were released.

Revenue for the first quarter reached $11.97 billion. This is up 50% from the $7.86 billion reported during the same quarter last year and is above the $11.40 billion that analysts predicted.

"Despite facing important challenges, our community and business are off to a strong start in 2018," said Facebook founder and CEO Mark Zuckerberg. "We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together."

Facebook reported net earnings of $4.99 billion, up 63% from last year's first quarter earnings of $3.06 billion. On an adjusted earnings per share basis, the company posted profit of $1.69 per share, surpassing the $1.35 per share Wall Street expected.

The social media giant has been in the headlines in recent months after it was revealed that users' personal data had been leaked to companies like Cambridge Analytica. Despite the controversy, Facebook's earning report suggests that advertisers were not as deterred by the negative press as analysts had expected. Advertising revenue reached $11.8 billion in the first quarter, up from $7.9 billion one year ago and above the $11.3 billion that analysts predicted.

Facebook, Inc. (FB) shares ended the week at $173.59, up 3.7% for the week.

Amazon Doubles its Quarterly Profit

Amazon.com, Inc. (AMZN) released its latest quarterly earnings report on Thursday, April 26. The e-commerce giant reported earnings that flew past expectations and a jump in quarterly revenue.

Amazon reported quarterly revenue of $51.04 billion, which is a 43% increase from last year's first quarter revenue of $35.71 billion and is above the $49.78 billion Wall Street expected. Amazon's cloud computing business, Amazon Web Services (AWS), grew 49% in the first quarter, topping $5.4 billion in sales.

"[Amazon Web Services (AWS)] had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down," said Jeff Bezos, Amazon founder and CEO. "As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That's why you're seeing this remarkable acceleration in AWS growth, now for two quarters in a row. A huge thank you to all our AWS customers, and you can be sure we'll keep working hard for you."

The company announced quarterly profits of $1.63 billion, up from earnings of $724 million one year ago. Amazon reported adjusted earnings of $3.27 per share, surpassing the $1.26 per share that analysts predicted.

Amazon's subscription services revenue, which includes its Prime membership program, increased 60% to $3.1 billion in the quarter. Last week, the company revealed for the first time the number of Prime subscribers, which exceeds 100 million members worldwide. Prime members enjoy shipping perks, video streaming and other benefits. During Amazon's first quarter earnings call on Thursday, the company announced that it will be increasing the price of its annual Prime membership from $99 to $119. The new price will be effective May 11 for new members and will apply to renewals starting on June 16.

Amazon.com, Inc. (AMZN) shares ended the week at $ 1,572.62, up 1.7% for the week.

Alphabet's Earnings Boosted by Ad Revenue

Alphabet Inc. (GOOGL) reported quarterly earnings on Monday, April 23. The parent company of Google saw increased revenue and earnings thanks to an increase in quarterly advertising revenue.

Alphabet announced revenue of $31.15 billion for the first quarter. This is up 26% from revenue of $24.75 billion reported in the same quarter last year and above analysts' expected $30.29 billion.

"Our ongoing strong revenue growth reflects our momentum globally, up 26% versus the first quarter of 2017 and 23% on a constant currency basis to $31.1 billion," said Alphabet CFO Ruth Porat. "We have a clear set of exciting opportunities ahead, and our strong growth enables us to invest in them with confidence."

Alphabet reported net earnings of $9.40 billion, up from $5.43 billion reported one year ago. On an adjusted earnings per share basis, the company reported profit of $9.93 per share, surpassing the $9.28 per share that analysts predicted.

The company's revenue was boosted by increased advertisement sales in the first quarter. Advertising revenue topped $26.6 billion, up from $21.4 billion in the same quarter last year. Alphabet's "other revenues," which includes smartphones and Nest devices, topped $4.3 billion compared to $3.2 billion one year ago.

Alphabet Inc. (GOOGL) shares ended the week at $ 1,030.05, down 4.4% for the week.

The Dow started the week of 4/23 at 24,488 and closed at 24,311 on 4/27. The S&P 500 started the week at 2,675 and closed at 2,670. The NASDAQ started the week at 7,174 and closed at 7,120.

Treasury Yields Slide Lower

Yields on U.S. Treasury bonds edged lower toward the end of the week as a wave of buying pressure increased demand for safe-haven government bonds. This marks a retreat from earlier in the week when the yield on the 10-year note made headlines by passing the 3% mark for the first time since 2014.

On Friday, the Commerce Department revealed that the U.S. gross domestic product (GDP) in the first quarter increased at a rate of 2.3%, exceeding the 2.0% that economists predicted but falling from the 2.9% rate in the previous quarter. Consumer spending slowed from a growth rate of 4.0% in the fourth quarter to a growth rate of 1.1% in the first quarter.

The drop in consumer spending caused bond yields to retreat on Friday morning after the report's release. In early morning trading on Friday, the yield on the 10-year Treasury note was lower at 2.975% while the yield on the 30-year Treasury note dropped to 3.148%. Despite slower GDP growth in the first quarter, many economists are interpreting this quarterly data as only a slight setback.

"I would not lose sleep over first-quarter GDP, there is the residual seasonality issue," said Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania. "Overall, the economy is doing very well and will continue to do well this year and into 2019."

On Tuesday, the yield on the 10-year Treasury note made headlines by topping 3% for the first time in four years. This sparked concern among investors that higher interest rates could take a cut out of corporate earnings and lead to faster inflation. By Thursday, the yield on the 10-year Treasury note had eased back below 3%.

"The US 10-year Treasury yield has been a driving force behind the choppy price action this week, with the rise through 3% raising fears there would be an exodus from the equity space, shrinking business investment and rising costs for leveraged firms," said IG market analyst Joshua Mahony. "Today's drop in the 10-year yield has helped banish some of the market fears over the negative economic impact of increasing rates."

The 10-year Treasury note yield closed at 2.96% on 4/27, while the 30-year Treasury note yield was 3.13%.

Mortgage Rates Reach 4-Year High

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, April 26. The report revealed that mortgage rates continued their climb, reaching their highest levels in four years.

The 30-year fixed rate mortgage averaged 4.58% this week, up from 4.47% last week. During this time last year, the 30-year fixed rate mortgage averaged 4.03%.

The 15-year fixed rate mortgage averaged 4.02% this week, up from 3.94% last week. Last year at this time, the 15-year fixed rate mortgage averaged 3.27%.

"Mortgage rates are now at their highest level since the week of August 22, 2013," said Sam Khater, Chief Economist at Freddie Mac. "Higher Treasury yields, driven by rising commodity prices, more Treasury issuances and the steady stream of solid economic news, are behind the uptick in rates over the past week."

Based on published national averages, the money market account closed at 1.16% on 4/27. The 1-year CD finished at 2.11%.